Facing escalating costs, Logan-based iFIT Health & Fitness has launched another round of layoffs worldwide as the company nears the settlement of a $300 million lawsuit over its debts and secures a new infusion of capital to help its bottom line.
Staff reductions for the maker of NordicTrack and other popular exercise equipment were announced internally Friday, according to sources close to the company who declined to be named as related negotiations had yet to be unveiled publicly.
Taken together, the financial moves put the company “on a sound financial footing with a clearer focus and path forward for profitable growth,” a source familiar with the details said. “It will make iFIT stronger,” and allow the private company to invest “substantially” in its brands and build its customer base.
A half-dozen employees in various departments have since confirmed that they had been let go. Several said the staffing cuts appeared to be deep.
Company spokesperson Colleen Logan said Friday she could not provide a specific number of employees or percentage of workforce affected by the layoffs, which follow a round of staff reductions in December.
The spokesperson said that all affected employees received severance packages equivalent to a week’s pay for every year of service up to 12 weeks. She provided no additional detail. Other sources confirmed the cuts stretched beyond workers at the firm’s Cache County headquarters.
Last fall, the company told federal regulators it had over 2,500 employees on three continents, including “more than 600 research and development professionals.”
Its moves on Friday also signal an indefinite delay of an initial public offering iFIT floated and then withdrew in October. That aborted stock sale stood to bring massive windfalls to several of its executives — including a top leader of The Church of Jesus Christ of Latter-day Saints and another high-ranking authority who had recently stepped down from his church position.
As co-founder of one of the iFIT’s early predecessors, 66-year-old apostle Gary E. Stevenson had been nominated to become a board director and, at the time, stood to gain as much as $911.9 million for nearly 43.4 million iFIT shares he accumulated through the years.
Being a corporate board member would appear to violate a long-standing church policy discouraging Latter-day Saint apostles from serving on such boards. But Stevenson had received a special exemption, a church spokesperson has said, “resulting from his legacy shareholdings and his role as a co-founder of the corporation.”
Robert C. Gay, now an emeritus general authority Seventy in the church, was nominated to that prospective board. With nearly 18 million shares, according to public documents, the IPO’s originally proposed share price of $21 would have lifted the 70-year-old’s holdings in iFIT to roughly $385.9 million.
Shares owned by iFIT’s CEO and chairman, Scott Watterson, who launched the firm with longtime friend Stevenson in 1977, stood to be worth a total of $4.6 billion post IPO.
Supply chain woes
(The Church of Jesus Christ of Latter-day Saints) Apostle Gary E. Stevenson speaks at General Conference on Saturday, Oct. 2, 2021. The church leaders stands to make millions when iFIT holds its initial public offering, but the company is enduring some hardships right now.
Archrival Peloton, iFIT and other similar makers of exercise equipment, including robust interactive content, saw a dramatic spike in demand for their products during the worst of the coronavirus pandemic as millions avoided public settings and shifted to home workouts.
Peloton and iFIT have since been suing and countersuing each other in several patent disputes involving their equipment lines.
Though not officially withdrawn, iFIT’s IPO plans remain on indefinite hold for now. At the time, iFIT cited “adverse market conditions” as they canceled the stock offering, and those conditions are even more volatile, given Russia’s invasion of Ukraine and other market challenges.
The company has negotiated a new infusion of private capital, sources said, in a mix of debt and private equity of undisclosed dollar value, intended partly to bolster operations as it works through persistent supply problems involving many key components.
Shipping containers, steel, resins and microchips essential to iFIT’s line of immersive workout machines have all skyrocketed in price amid short supplies, the sources said, and the firm has resisted passing on the brunt of those added costs to consumers, stressing it financially in the near term.
The company laid off hundreds of employees around Christmas across several departments after telling workers in previous months that it was doing “better than ever.”
Lawsuit ends ‘amicably’
Sources said iFIT’s latest capital injection, which could be publicly unveiled as soon as next week, will also be accompanied by the formal resolution of a high-profile $300 million lawsuit filed against it in January by global hedge fund Pamplona Capital Management, which lent iFIT $200 million in 2019.
Pamplona’s lawsuit sought to claw back the original loan, plus $100 million in interest, according to court documents. It reportedly stemmed from a dispute with the top shareholder over iFIT’s decision to acquire an unnamed Chinese manufacturing company.
That litigation, filed in a New York court, had been resolved “amicably,” sources close to the company said.
News reports at the time cast the suit as an existential threat to iFIT as it saw sagging demand for its at-home workout products with easing pandemic conditions and consumers returning to the gym. The New York Post said iFIT had hired high-powered bankruptcy attorneys at one point.
Sources close to the company told The Salt Lake Tribune on Friday the firm’s financials were being squeezed by supply issues and seasonal market shifts — but that iFIT is also seeing strong signals that underlying demand for its products wasn’t being dampened.
The firm reported its revenues topped $1.7 billion in the 12 months ending May 31, up from $851 million the previous year. Sources said iFIT was also seeing record participation of late in its workouts and events and now has 7.3 million subscribers in 120 countries.
They called the layoffs and other financial moves “some difficult but important decisions regarding cost efficiencies,” while adding that they were needed to “safeguard the business long term.”
